I hope this email finds you well. I understand that you are facing an increase in the cost of supplies for the California Container division, specifically a .15 fuel surcharge added to the cost of cardboard. I have done some calculations to help you understand the impact of this increase on your business.
Based on the information provided, the old break-even point for the California Container division was 3.3 million packages. This was determined by dividing your fixed monthly cost of $257,000 by the difference between the price of the package ($3.24) and the variable cost ($1.37).
With the new fuel surcharge, the variable cost of the package will increase to $1.52. Using the same method, the new break-even point for the California Container division will be 3.68 million packages.
In order to make the same profit as before the fuel surcharge, you will need to produce approximately 380,000 more packages. This was calculated by multiplying the difference between the old and new break-even points (3.3 million – 3.68 million) by the price of the package ($3.24).
It’s important to consider that these calculations are based on the information provided and assumptions about the fixed and variable costs. It would be beneficial to conduct a more detailed analysis of the costs and pricing strategies in order to make informed decisions for the division.
Please let me know if you have any questions or if you need any additional information.